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Traders, cops and robbers

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  • Anderson, James E.
  • Bandiera, Oriana

Abstract

Why does illegal trade often flourish without formal enforcement, but sometimes fail? Why do illegal trade-reducing policies often fail? Why do States often appear to tolerate illegal trade? A model of trade with cops and robbers provides answers. `Safety in numbers' is a key element: the equilibrium probability of successful shipments is increasing in trade volume. Even without conventional fixed costs, safety in numbers implies scale economies which can explain the absence or robustness of trade subject to predation. Spilling over between markets, safety in numbers implies that illegal trade can foster legal trade and State revenue.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 70 (2006)
Issue (Month): 1 (September)
Pages: 197-215

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Handle: RePEc:eee:inecon:v:70:y:2006:i:1:p:197-215

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  1. James E. Anderson & Douglas Marcouiller, 2005. "Anarchy And Autarky: Endogenous Predation As A Barrier To Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 189-213, 02.
  2. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
  3. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
  4. Herschel I. Grossman, 1997. ""Make Us a King": Anarchy, Predation, and the State," NBER Working Papers 6289, National Bureau of Economic Research, Inc.
  5. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  6. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
  7. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
  8. Neher, Philip A, 1978. "The Pure Theory of the Muggery," American Economic Review, American Economic Association, vol. 68(3), pages 437-45, June.
  9. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series 477, Research Institute of Industrial Economics.
  10. Marcouiller, Douglas & Young, Leslie, 1995. "The Black Hole of Graft: The Predatory State and the Informal Economy," American Economic Review, American Economic Association, vol. 85(3), pages 630-46, June.
  11. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  12. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
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Citations

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Cited by:
  1. James E. Anderson, 2008. "Does Trade Foster Contract Enforcement?," NBER Working Papers 14045, National Bureau of Economic Research, Inc.
  2. James E. Anderson, 2008. "Terrorism, Trade and Public Policy," Boston College Working Papers in Economics 701, Boston College Department of Economics.
  3. Stelios Michalopoulos & Alireza Naghavi & Giovanni Prarolo, . "Trade and Geography in the Economic Origins of Islam: Theory and Evidence," Discussion Papers Series, Department of Economics, Tufts University 0750, Department of Economics, Tufts University.
  4. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," Working Paper 2004-17, Federal Reserve Bank of Atlanta.
  5. Sami Bensassi & Inmaculada Martínez-Zarzoso, 2012. "How Costly is Modern Maritime Piracy to the International Community?," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 869-883, November.
  6. Marcus Noland & Stephan Haggard, 2012. "Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration," Working Paper Series WP12-8, Peterson Institute for International Economics.
  7. Anderson, James & Vesselovsky, Mykyta & Yotov, Yoto, 2014. "Gravity with Scale Economies," School of Economics Working Paper Series 2014-4, LeBow College of Business, Drexel University.
  8. James E. Anderson, 2008. "Economic Integration and the Civilising Commerce Hypothesis," The World Economy, Wiley Blackwell, vol. 31(1), pages 141-157, 01.
  9. James E. Anderson, 2008. "Commercial Policy in a Predatory World," Boston College Working Papers in Economics 703, Boston College Department of Economics.
  10. Arghya Ghosh & Peter Robertson, 2012. "Trade and expropriation," Economic Theory, Springer, vol. 50(1), pages 169-191, May.

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